In an effort to revitalize the local economy, the central government has been pushing the city to diversify its economy away from the casino industry and transform itself into a tourist and culture destination, appealing to gamblers and non-gamblers alike. This change in direction is evident in various government p
In an effort to revitalize the local economy, the central government has been pushing the city to diversify its economy away from the casino industry and transform itself into a tourist and culture destination, appealing to gamblers and non-gamblers alike.
This change in direction is evident in various government policies currently in effect, capping the number of gambling tables allotted to each casino as well as granting operating licenses based on what the new resorts can offer in terms of attractions other than gambling. “Macau appears to be diversifying and future gaming licenses are now somewhat limited. With more emphasis on families, culture, and other activities as opposed to the traditional VIP high level focus, we can expect the Macau experience to incorporate more of the Portuguese heritage and associated art, dining, and culture,” said Peter Francis, VP of EMEA and Asia at Gallagher.
Hotel Resorts are on the Rise
One of the newest attractions on the Cotai strip is a testament to this new development. Studio City, a US$3.2 billion integrated hotel and casino resort, is the first of its kind to not feature VIP gaming. Instead, it is banking on gaining revenues by appealing to mass-market tourists through family-friendly attractions like its figure-of-eight Ferris wheel and Batman theme ride.
Another huge project, the Galaxy Phase II complex, opened with only 150 gaming tables and included the construction of three new hotels, with a huge retail area showcasing a wide selection of luxury brands to lure in shoppers who might not be interested in gambling. Five other casino resorts, with their own non-gambling and retail attractions, are set to open in the next few years.
It appears that casino operators are gambling on increasing tourist revenue with these new attractions. According to Union Gaming Research, a total of around $23 billion is currently allocated for construction projects that will increase the number of hotel rooms in the city by 50 percent, a building boom that will increase the number of rooms to approximately 40,000.
Only time will tell, though, if these projects will prove successful in drumming up new business and attracting tourists to visit and stay longer. “It will be a difficult uphill battle for the Macau government to push diversification away from gaming towards more leisure activities. Macau has traditionally been a gaming mecca for Asia relying on the tax revenues they generate. With limited land mass available for development, finding suitable tourism projects that will provide viable financial returns will be challenging,” remarked Bob Ruggles, Business Development Manager of APAC at Pelco by Schneider Electric.
Additional Sources of Opportunities
During this time, security companies are looking toward tapping into opportunities brought forth by the government's focus in developing new sectors for economic growth. “Entertainment and leisure development will no doubt be a part of the future of Macau and there will need to be a service industry built around it for support. The resources required for this transaction will also require people to be retrained to ensure its success,” continued Ruggles.
New and ongoing infrastructure projects reflecting the current government policies can drive up the need for security around the island. “The city is entering an adjustment period where it will need to develop a broader range of attractions for tourists and there will still be a need to secure these venues,” said Lawrence de Guzman, VP of APAC at Vicon Industries.
As Macau is adjusting to the new gaming landscape, the decline in revenue coupled with increased regional competition for VIP gamblers from countries like the Philippines and South Korea, might be dimming the current economic outlook for this gaming capital. However, many are expecting the gambling industry to remain the main part of this city's economy. “Just because the gambling industry is not at its peak at the moment, doesn't necessarily mean that the demand for security solutions will go downhill,” said Michael Ng, Regional Sales Leader, Security for Hong Kong, Macau, and Taiwan at Honeywell Security and Fire.
According to Fitch Ratings' 2016 Macau outlook report, the gaming sector is expected to initially suffer from revenue losses, but returns will improve to acceptable levels in the next two to three years, after all the infrastructure projects in the area are completed and open to mass-market tourists.
With New Challenges Come New Opportunities
While it is apparent that Macau is still adjusting to this new phase of its development, projects are being implemented around the island to diversify the economy in an effort to increase its odds for success. Security companies are viewing this period as both a challenge and an opportunity to expand their business into new sectors that are opening up as a result.